Oil markets, fracking, and the global economy | VOX, CEPR Policy Portal
Francesco Lippi How important is the oil market for the global economy? Although oil shocks are often viewed as responsible for the poor performance of many countries in the 1970s, these shocks have played a relatively minor role in leading macroeconomic models. Because oil represents a relatively small share of overall production costs, conventional models imply that oil shocks have a limited impact on aggregate output. This conclusion has recently been challenged by Gabaix (2011), Acemoglu et al. (2012), and Baqaee and Farhi (2019). These authors argue that shocks to sectors with a small fa...
Source: voxeu.org